Institutions such as brokerage houses historically have used automated systems to process transactions in such investment vehicles as stocks, bonds, other securities, and options. In the case of options, these systems process transactions in which the buyer of the option purchases the right to buy (in the case of a call) or sell (in the case of a put) a certain number of shares of a particular security at a given price. The purchaser of this right must exercise it before the expiration date of the option. If the buyer fails to exercise the option by the expiration date, or if the price of the underlying security for the option is such that the option is valueless immediately before its expiration, the purchaser of the option loses his or her entire investment.
On the other hand, such non-renewable options provide the purchaser with a great deal of leverage in that much higher returns on investment can be achieved with such options than can be achieved with transactions in underlying securities. Furthermore, while the option purchaser may lose his entire investment, the total amount of such an investment per option is typically much less than the price of the underlying security and thus places a limit on the amount of money an investor can lose. Further, such investments allow purchasers to participate in price changes of securities with far smaller investments than are required for purchasing underlying securities.
The present invention solves these problems by providing a system and method for processing transactions in investment vehicles which provide purchasers with the leverage and other advantages of non-renewable options, yet which also have the greater stability and long-term value of investing in underlying securities. Such a renewable option system and method would allow for repeated renewal of the options for such time periods as the lifetime of the option owner or even have no expiration (e.g. a permanent option). Ideally, such a renewable option system and method would be adaptable for dealing in transactions through a multiuser market, or through matching individual buyers and sellers of such an investment. Such a renewable option system and method should also be adaptable for meeting regulatory requirements and being monitored by a regulatory agency, if necessary.